Dell to Go Private in $24.4 Billion Deal That Includes Microsoft

Dell finally announces a deal to take the company private, with Michael Dell retaining control and Microsoft as part of the consortium.

Dell executives are taking the world's third-largest PC maker private, after weeks of speculation, in an effort to enable it to ramp up their efforts to transform the company.
Dell made the announcement Feb. 5, after the company's board of directors reportedly approved the deal in a meeting the night before. In the largest leveraged buyout since before the global recession hit in 2008, Dell stockholders would get $13.65 in cash for each share of Dell common stock, about a 25 percent increase from the company's closing share price on Jan. 11 of $10.88.
The board of directors voted on the recommendation of a special committee put together to oversee the process. The deal is valued at about $24.4 billion, according to the company, and still needs to go to a vote among unaffiliated stockholders.
Under the deal, founder and CEO Michael Dell and investment firm Silver Lake Partners will buy Dell. Included in the consortium that is buying Dell is Microsoft. Michael Dell, who already owned 14 percent of Dell, is expected to invest more of his personal fortune and via his investment firm, MSD Capital, to retain control of the company. Silver Lake will put in $1 billion, while Microsoft will lend another $2 billion, according to reports.

Debt financing will come from BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets, and cash on hand, according to Dell. The deal is expected to close before the end of Dell's fiscal 2014 second quarter.

Michael Dell first approached the board of directors in August 2012 with the idea of taking the company private, according to the Dell statement. The special committee was formed after that, with Alex Mandl serving as lead director. The committee got financial, strategic and legal advice from J.P. Morgan and Debevoise & Plimpton, and received an independent analysis from "a leading management consulting firm," and later hired Evercore Partners for more advice.
"I believe this transaction will open an exciting new chapter for Dell, our customers and team members," Michael Dell said in a statement. "We can deliver immediate value to stockholders, while we continue the execution of our long-term strategy and focus on delivering best-in-class solutions to our customers as a private enterprise. Dell has made solid progress executing this strategy over the past four years, but we recognize that it will still take more time, investment and patience, and I believe our efforts will be better supported by partnering with Silver Lake in our shared vision.
"I am committed to this journey and I have put a substantial amount of my own capital at risk, together with Silver Lake, a world-class investor with an outstanding reputation. We are committed to delivering an unmatched customer experience and excited to pursue the path ahead," he continued.
Included in the deal is a "go-shop" period, where the special committee and Evercore Partners can consider offers from other groups or organizations interested in buying Dell. The initial go-shop period will last 45 days; there is a provision for another 45 days after that to allow the special committee to continue discussions with other bidders, enter into a transaction or recommend other proposals. Any other groups that make a qualifying proposal during the initial 45-day period would have to pay $180 million if that deal is terminated, according to Dell's statement.